Revisions to Procedures for the Departmental Appeals Board and Other Departmental Hearings, 73708-73720 [07-6221]

Agencies

• DEPARTMENT OF HEALTH AND HUMAN SERVICES
• Office of the Secretary
• Centers for Medicare and Medicaid Services
• Office of the Inspector General
• Centers for Medicare & Medicaid Services

[Federal Register Volume 72, Number 248 (Friday, December 28, 2007)]
[Proposed Rules]
[Pages 73708-73720]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 07-6221]


=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare and Medicaid Services

42 CFR Parts 422, 423, and 498

Office of the Inspector General

42 CFR Part 1005

Office of the Secretary

45 CFR Parts 16, 81, 160 and 1303

RIN 0991-AB42


Revisions to Procedures for the Departmental Appeals Board and 
Other Departmental Hearings

AGENCY: Office of the Secretary, Centers for Medicare and Medicaid 
Services, HHS.

ACTION: Notice of Proposed Rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Department of Health and Human Services (Department) 
proposes to amend Departmental regulations governing administrative 
review by the Departmental Appeals Board (DAB) and certain other 
administrative review regulations to ensure that the final 
administrative decision of the Department reflects the considered 
opinion of the Secretary of Health and Human Services (Secretary). 
Current regulations at 45 CFR Part 16 governing the review of grant 
disputes do not specifically require the DAB to follow published 
guidance issued by the Secretary or a Departmental component. The DAB 
decision is currently the final administrative decision of the 
Department on such disputes and currently there is no Secretarial 
review of this final decision. Similarly, the DAB currently provides 
the final agency review of the imposition of civil monetary penalties 
(CMPs) for which administrative appeal is available under 45 CFR Part 
160, Subpart E, enforcement sanctions under 42 CFR Part 422 and 423, 
determinations subject to reconsideration and appeal under 42 CFR Part 
498 and the imposition by the Inspector General of the Department 
(I.G.) or the Centers for Medicare and Medicaid Services (CMS) of 
exclusions, CMPs and assessments subject to appeal under 42 CFR Part 
1005. As in 45 CFR Part 16, the decisions of the DAB under these 
processes are considered the final agency action on matters, though 
they are not subject to Secretarial review.
    This proposed rule would amend DAB regulations to require that the 
DAB follow published guidance that is not inconsistent with applicable 
statutes and regulations and would permit the Secretary an opportunity 
to review DAB decisions to correct errors in the application of law, or 
deviations from published guidance, in such disputes. This proposed 
rule would make technical changes to the regulations at 45 CFR Part 16. 
This proposed rule would also amend hearing and appeal procedures at 45 
CFR Part 160, Subpart E and at 42 CFR Parts 422, 423 and 498 to include 
a parallel statement regarding the treatment of published guidance. 
Similarly, this proposed rule would amend the procedures at 45 CFR Part 
81 to provide a similar statement regarding the treatment of published 
guidance by hearing examiners and reviewing authorities. In addition, 
this proposed rule would amend the hearing and appeal procedures at 45 
CFR Part 160, Subpart E and 42 CFR Parts 422, 423, 498 and 1005 to 
provide a parallel opportunity for Secretarial review of DAB decisions. 
Finally, this proposed rule would revise the procedures for Head Start 
grantee appeals by applying the current 60-day time limit for ``final 
decisions'' to the Board's decision.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on January 28, 2008.

ADDRESSES: You may submit comments either by E-mail to 
randolph.pate@hhs.gov or by mail to: Randy Pate, 200 Independence Ave., 
SW., Room 415F, Washington, DC 20201.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.

FOR FURTHER INFORMATION CONTACT: Randy Pate, 202-690-7858.

SUPPLEMENTARY INFORMATION: 

I. Background

    HHS was the first federal grantor agency to offer a structured 
process of administrative dispute resolution for its grantees on a 
large scale, when, in 1973, it established what was then called the 
Departmental Grant Appeals Board. The name was changed to the 
Departmental Appeals Board (DAB) when, as noted below, the jurisdiction 
was significantly expanded. The name ``Departmental Appeals Board'' is 
now used to refer to two entities: (1) the decision-making body 
consisting of Board Members, appointed by the Secretary, who issue 
decisions made by panels of three Board Members; and (2) in general, 
the larger organization, which is located in the Office of the 
Secretary and which includes not only the Board, but also

[[Page 73709]]

Administrative Law Judges (ALJs), Administrative Appeals Judges who 
serve on the Medicare Appeals Council, and organizational divisions 
that support the Board Members and Judges, and perform other 
organizational functions. Below, we use the term ``Board'' to refer to 
the decision-making body and the acronym ``DAB'' to refer to the larger 
organization.
    The current rules for the Board, at 45 CFR Part 16, were issued on 
August 31, 1981, at 46 FR 43818. Those rules set out a fair, quick and 
flexible process for appeal from final written decisions. The rules 
provide a framework which has been used by the Department for 
resolution of an increasing range of disputes.
    The basic jurisdiction of the Board over grant disputes is 
described in Appendix A to the current regulations at 45 CFR Part 16. 
This jurisdiction is exercised by the Board Members, with support from 
the Appellate Division of the DAB. The Board also has appellate 
jurisdiction over disputes that are heard by Administrative Law Judges 
(ALJs) who, in most cases, are assigned to the DAB and supported by the 
Civil Remedies Division of the DAB. These ALJ hearings are conducted 
pursuant to separate regulatory provisions, but ALJ decisions are 
subject to review by the Board. In 1988, the Secretary delegated to the 
DAB responsibility for adjudicating civil money penalties and 
exclusions imposed under a wide range of fraud and abuse authorities. 
In 1993, the Secretary delegated to the DAB responsibility for hearing 
appeals in provider and supplier participation, enrollment and 
enforcement cases brought by CMS. Also, when the Social Security 
Administration (SSA) became an independent agency in 1995, the 
Secretary delegated to the Board Chair the Medicare Appeals Council 
function of hearing appeals in Medicare coverage, payment and 
entitlement cases.
    The DAB has final review authority over the reconsideration and 
appeal process for determinations under 42 CFR Part 498. These are 
procedures for reviewing certain specified initial determinations, 
which include those that affect participation in the Medicare and 
Medicaid programs, impose sanctions on certain providers, and impose 
enforcement remedies on laboratories under both Medicare and the 
Clinical Laboratories Improvement Amendments of 1988. Under these 
procedures, providers or suppliers generally have a right to a hearing 
before an ALJ, and a review of the ALJ decision by the Board. When this 
process was first established, by final rule published at 33 FR 7317 
(May 17, 1968), the final review was vested in the Appeals Council of 
the Social Security Administration, which was then a component agency 
of this Department. Final review authority was transferred to the DAB 
after the SSA became an independent agency. 61 FR 32347 (June 24, 
1996).
    The DAB has final review authority under 42 CFR Part 1005 over 
disputes concerning the imposition of exclusions, CMPs, and assessments 
relating to health care fraud and abuse under sections 1128 and 1128A 
of the Social Security Act as well as other disputes. CMS and the I.G. 
have been delegated the authority by the Secretary to administer these 
health care fraud and abuse authorities, as described in 42 CFR Parts 
402, 1001, 1003, and 1005. As provided in 42 CFR Part 1005, disputes 
concerning the exercise of these authorities are heard by an ALJ, and 
the decision of the ALJ may be appealed to the DAB. Under these 
regulations, the scope of ALJ and DAB review is limited.
    The DAB has review authority concerning Medicare Local Coverage 
Determinations (LCDs) and National Coverage Determinations (NCDs) 
pursuant to section 1869(f)(1) of the Social Security Act and to 
regulations at 42 CFR Part 426. Challenges to LCDs are heard initially 
by ALJs, with a statutory right of appeal to the Board, and challenges 
to NCDs are heard by the DAB directly. This proposed rule would not 
affect the LCD or NCD review authority.
    Under 45 CFR Part 150, ALJs of the DAB provide hearings concerning 
the imposition of civil money penalties by CMS against health insurance 
issuers and non-federal governmental plans for failure to comply with 
requirements of title XXVII of the Public Health Service Act and with 
regulations at 45 CFR Parts 146 and 148 (``HIPAA portability 
requirements''). This proposed rule would not affect these hearings, 
which are subject to review by the CMS Administrator.
    On February 16, 2006, at 71 FR 8389, the Department issued final 
rules located in 45 CFR Part 160, Subpart E, providing for Board final 
review authority over disputes involving the imposition of civil money 
penalties for violation of the Administrative Simplification provisions 
of Title II of the Health Insurance Portability and Accountability Act 
of 1996 (HIPAA) and its implementing regulations. These provisions 
contain standards for certain financial and administrative 
transactions, code sets, unique health identifiers and the security and 
privacy of certain health information. The authority for civil money 
penalties is contained in section 1176 of the Social Security Act, 42 
U.S.C. 1320d-5, which at subparagraph (a)(2) provides an opportunity 
for administrative appeals, by incorporating by reference section 1128A 
of the Social Security Act, which includes the administrative hearing 
and appeals requirements set forth in section 1128A(c), 42 U.S.C. 
1320a-7a.
    On December 5, 2007, at 72 FR 68700, CMS issued final regulations 
at 42 CFR Parts 422 and 423 providing for appeals of civil money 
penalties imposed on Medicare Advantage organizations and Medicare 
prescription drug sponsors (based on a proposed rule issued May 25, 
2007 at 72 FR 29368). These regulations provided for an opportunity for 
a hearing before an ALJ and review of the ALJ determination by the 
Board.
    The DAB also exercises additional hearing and appeal 
responsibilities based on procedural delegations of authority. Such 
delegations can be made on a case-by-case basis, through a general 
delegation of authority over a class of disputes, or through other 
arrangements between the DAB and the Secretary or the head of the 
appropriate HHS operating division or other agency responsible for 
administering the program.
    As the DAB's jurisdiction has increased, the issues for DAB review 
have grown in complexity and significance. In addition, the volume of 
cases has grown considerably. The DAB has responded to the challenges 
posed with considerable diligence and sophistication. In particular, 
Board members have developed great expertise in dispute resolution, 
hearing procedures, and many aspects of the subject Departmental 
programs.
    The procedures used by the Board for grant disputes are broadly 
modeled after adversary judicial proceedings and have been successful 
in resolving factual disputes based on a record. Current rules, 
however, lack sufficient safeguards to avoid putting the DAB in a 
situation where it is prompted to substitute its judgment on 
interpretive issues for that of the Secretary or the delegated 
component with interpretive authority. While the Board has considerable 
expertise in Departmental programs, however, under the current rules, 
the Board does not have access to the full range of policy 
considerations that the Secretary and the relevant component may have 
in interpreting applicable statutes and regulations.
    Similar considerations apply in the Board's appellate review of ALJ 
decisions concerning civil money penalties under 45 CFR Part 160, 
Subpart E, enforcement sanctions under

[[Page 73710]]

42 CFR Parts 422 and 423, review of initial determinations under 42 CFR 
Part 498, or review of ALJ decisions concerning civil remedies.
    Current regulations at 42 CFR Parts 422, 423, and 498 do not 
specifically articulate the applicability of statutes, regulations, or 
published guidance. And the current procedures at 45 CFR Part 160, 
Subpart E, 42 CFR Part 498 and 42 CFR Part 1005 contain no provision 
for Secretarial review.
    As a result, these hearing procedures do not provide sufficient 
safeguards to ensure that the decisions accurately reflect the 
considered views of the Secretary.
    In addition to the Departmental hearing procedures discussed above, 
under 45 CFR Part 81, there are procedures governing administrative 
hearings pursuant to Title VI of the Civil Rights Act of 1964 and 45 
CFR Part 80. These hearings are conducted by hearing examiners who are 
authorized, under Sec.  81.62, either to make initial decisions or to 
recommend findings and propose decisions. These decisions are 
reviewable by a reviewing authority, under Sec.  81.104, and by the 
Secretary, under Sec.  81.106.
    The hearing regulations in 45 CFR Part 81 do not clearly articulate 
the applicability of statutes, regulations or published guidance. 
Although the regulations can be read to imply that presiding officers 
and reviewing authorities will be bound by applicable statutes, 
regulations and guidance, there is no clear articulation of this 
standard. As a result, there is a possibility that decisions of 
presiding officers and reviewing authorities will not accurately 
reflect applicable law or policy.

II. Provisions of This Proposed Rule

    This rule proposes substantive changes in the general DAB 
procedures at 45 CFR Part 16, and in the hearing and appeal procedures 
at 45 CFR Parts 81 and 160, Subpart E, 42 CFR Part 1005 and 42 CFR Part 
498. The rule proposes to clarify that, in cases heard by the Board 
under the authority of 45 CFR Part 16, the Board must follow published 
guidance issued by the Secretary or relevant component to the extent 
the guidance is not inconsistent with applicable statutes and 
regulations. The rule proposes to provide an opportunity for 
Secretarial review (including, where the Secretary deems appropriate, 
remand) of Board decisions under 45 CFR Part 16. The rule would also 
amend 45 CFR Part 16 in several places to update the DAB's title, 
update the current mailing address, and remove certain outdated 
regulatory references. And the rule would amend Appendix A to 45 CFR 
Part 16 to clarify that the Board's authority to hear disputes may 
arise from a procedural delegation of authority directly from the 
Secretary or other responsible official. The rule additionally proposes 
to make conforming amendments to articulate the applicability of 
statutes, regulations and published guidance in hearing and appeals 
procedures under 45 CFR Part 81 and Part 160, Subpart E, and under 42 
CFR Part 498. We would also provide an opportunity for Secretarial 
review of decisions under 45 CFR Part 160, Subpart E, and 42 CFR Parts 
498 and 1005.
    We anticipate that, unless there are statutory reasons to the 
contrary, future areas of DAB jurisdiction will incorporate similar 
review procedures. We also intend that each of the provisions of this 
DAB proposed rule will remain in force if any of the provisions are 
invalidated for any reason.
    Any final rule based on this proposed rule would be effective 
prospectively only, and would not affect final decisions that have been 
issued by the Board prior to the effective date. The final rule would 
affect cases that are still under Board review as of the effective date 
of the final rule.
    We address each of the modifications in this proposed rule 
individually below:

A. Applicability of statutes, regulations and published guidance (45 
CFR Sec.  16.14)

    Current regulations at 45 CFR Sec.  16.14 provide that the Board 
``shall be bound by all applicable laws and regulations.'' This 
provision, however, does not address the weight to be afforded 
interpretations of statutes and regulations that have been adopted by 
the Secretary either directly or through the Departmental component 
with delegated authority to administer the program whose decision is 
the subject of Board review.
    In this proposed rule, we clarify that the Board should follow 
published guidance of the Secretary or relevant component, to the 
extent not inconsistent with applicable statutes and regulations. This 
requirement would parallel the standard included at 45 CFR Sec.  
160.508(c)(1) of the final regulations recently issued governing 
appeals involving the imposition of civil money penalties for 
violations of the Administrative Simplification provisions under HIPAA 
and its implementing regulations. As we indicated in that rulemaking, 
by ``published guidance'' we mean to include guidance that has been 
publicly disseminated. 71 FR 8416. In this case, this includes, for 
example, guidance issued through manual provisions, State Medicaid 
Directors letters, or posting on the CMS Web site. While this would not 
include written statements that are issued to particular grantees, or 
in briefs filed by the respondent agency in litigation, we expect that 
the Board would give weight to such statements in the absence of 
contrary published guidance or conflicts with other agency statements, 
as an initial exercise of the interpretative authority delegated to the 
agency and an expression of the agency's policy expertise. This is 
particularly true with respect to issues of first impression. When 
there is no published guidance on an issue, or when there is ambiguity 
in the published guidance, we would expect the Board to review relevant 
unpublished issuances for direction in interpreting such an issue.
    By ``relevant component'' we mean the Departmental component 
delegated responsibility for interpreting and administering the 
provision at issue. This would not necessarily be the component that is 
a party in the proceeding before the Board. For example, the issuances 
of a component operating a grant program would not be controlling with 
respect to interpretations of cost allocation requirements, since 
responsibility for interpreting such requirements is delegated to the 
Departmental Division of Cost Allocation. To make this clear, we are 
also providing that the Board will be bound by Secretarial delegations 
of authority.
    This clarification would help to ensure that the decisions of the 
Board reflect the considered judgment of the Department on such issues. 
The proposed provision would explain that it is not the role of the 
Board to weigh the relative strengths of an interpretation adopted 
after due consideration of relevant factors by the Department or its 
components. The strength of regulatory and policy interpretations are 
necessarily considered in their adoption. It is the role of the 
Department and its components to craft regulations and adopt policy 
interpretations. In that process, the Department necessarily 
contemplates various policy alternatives and litigation risks. Those 
considerations are legitimately left to the discretion of the 
Department and its components rather than an adjudicative body like the 
Board. Because the Board was created as an adjudicator, separate and 
apart from the policy-making components of the Department, its role is 
important but limited. As the

[[Page 73711]]

Supreme Court has recognized, where a separate administrative 
adjudicatory body is created, its role is limited to finding facts and 
resolving individual disputes, but it is not authorized to develop new 
interpretive policies. Having the DAB substitute its policy views would 
limit the ability of the Department to determine the level of 
acceptable risk in light of program priorities and goals, and 
ultimately would limit Departmental flexibility in performing its 
functions.
    We anticipate that this change would have greater effect in 
statutory entitlement programs than it would in discretionary grant 
programs. In certain discretionary grant programs, the requirements are 
neither statutory nor regulatory but are largely set by the grant award 
terms and conditions. These requirements are akin to contractual 
obligations. In these discretionary grant programs, the issue of notice 
to the grantee of a purported requirement may be the key issue in 
resolving disputes. The adequacy of the notice may depend on the 
specific grant documents applicable to the grant award. By contrast, in 
statutory entitlement programs, requirements are set in statute and 
regulation, and disputes focus on statutory and regulatory 
interpretation. In those instances, the DAB would be required to follow 
published guidance of the Secretary or the relevant component on the 
interpretive issue. Notice to the grantee generally would not be 
determinative in a statutory program since the applicable statute or 
regulation gives grantees notice of the scope of interpretive 
flexibility.

B. Secretarial Review of DAB Decisions Concerning Disputes (45 CFR 
16.21)

    The original rules of the Board provided for the relevant 
constituent component of the Department to review, modify, or reverse 
Board decisions before they became final decisions of the Secretary. 45 
CFR 16.10 (1973); 38 FR 9907 (Apr. 20, 1973). In 1978, HHS's rules were 
modified so that the Board decisions would be ``final administrative 
decisions with respect to reconsideration of disallowances arising 
under various Federal-State public assistance programs.'' 43 FR 9264, 
9264 (March 6, 1978). When the current Board grant review regulations 
were originally proposed on January 6, 1981, 46 FR 1644, there was a 
provision for Secretarial review of Board decisions. In the final 
rules, adopted on August 31, 1981, 46 FR 43816, that provision was 
omitted. The preamble to the final rule stated that numerous comments 
had been submitted on this issue, and that ``[t]he Department continues 
to study whether Board decisions should be `final' or should be subject 
to Secretarial review.'' The preamble indicated that the omission of 
the provision for Secretarial review did not reflect a final decision 
on this issue, but was an interim measure ``to avoid further delay in 
implementing these procedures.''
    Now, with over 20 years of experience, we are again proposing to 
authorize Secretarial review of Board decisions. This change is 
intended to ensure consistency in decision making and to ensure that 
the Secretary's policies are correctly implemented. Further, this 
proposed change is consistent with the rules originally establishing 
the Board for adjudication of grant disputes. While we intend that the 
instances of Secretarial review will be limited, the availability of 
such review is essential to ensure the accuracy of DAB decisions in 
reflecting the proper application of relevant statutes, regulations and 
interpretive policy. Such accuracy is important because Board decisions 
are binding on the Department in the case at hand, are considered final 
federal agency action for purposes of judicial review, and may have 
some precedential value for future adjudications. In cases of first 
impression, these decisions may be the first articulation of 
Departmental interpretation and implementation of policies with respect 
to applicable statutes and regulations. Only through review of DAB 
decisions can the Department exercise its full authority to interpret 
and implement statutory and regulatory provisions and ensure that the 
Secretary's policies are appropriately implemented. The Secretary's 
views will continue to be ultimately subject to federal court review.
    We are proposing a clear time frame for the Secretary to determine 
whether to undertake review, so as not to unduly delay the 
administrative review process and the availability of judicial review. 
We believe 30 days should be sufficient time for the Secretary to 
determine whether review is warranted. We have not proposed any process 
for either party to request Secretarial review, and we do not 
anticipate that the Secretary or the delegated official performing the 
review would consider external requests for review.
    We anticipate that Secretarial review will ordinarily be completed 
within a 45-day time frame after acceptance of review. In light of the 
varying complexity and significance of Board cases, however, we are not 
proposing to limit the time for Secretarial consideration. For example, 
additional time may be required in cases involving a voluminous record, 
or when additional development of the record is necessary.
    After undertaking review, the Secretary would be authorized to 
affirm or reverse a Board decision, or to remand a case back to the 
Board for further consideration of identified errors in the application 
of statutes, regulations or interpretive policy. In cases where 
Secretarial review is undertaken, the original DAB decision would be 
regarded as a proposed decision, and would be set aside to the extent 
inconsistent with the Secretary's review decision.
    In cases involving certain parts of title IV of the Social Security 
Act, the Secretary would only be authorized to affirm the Board or 
remand the case back to the Board with instructions for further 
consideration. This is because sections 410(c) and 1123A(c) of the 
Social Security Act, pertaining to the program for Temporary Assistance 
for Needy Families, provide that the final decision of the Board is 
appealable to federal court. In these cases, while we would provide for 
Secretarial review, the Board would issue the final agency decision.
    We have not proposed in the regulatory text any briefing or other 
procedures for Secretarial review in order to maintain flexibility to 
tailor the process to the needs of the particular case. We anticipate 
that the Secretary would notify the parties as to the procedures to be 
followed. But we invite comments on whether the regulations should 
specify procedures for Secretarial review.
    We propose to require that the Secretary would issue a written 
decision upon review. In the case of affirmance or reversal of the 
Board decision, this would be the final decision of the Secretary on 
the matter. The written decision would contain the basis for the 
Secretary's conclusions. In the case of a summary affirmance, or a 
partial affirmance, the written decision could incorporate by reference 
some or all of the Board decision. In the case of a remand of the case 
to the Board for further proceedings, the written remand order would 
include the basis for remand and would instruct the DAB in the proper 
application of statutes, regulations or interpretive policy. Upon 
remand, the Board would be bound by the Secretary's remand 
instructions. The Board would be responsible, however, to apply the law 
to the facts of the particular case. The Board would thus issue a new 
decision in accordance with the Secretary's instructions.

[[Page 73712]]

    While we anticipate that Secretarial review will be a review of the 
record created before the Board, the Secretary may identify specific 
issues for which additional briefing by the parties is necessary. This 
additional briefing would ensure that the record fully reflects the 
factual, legal and policy issues that the Secretary considers in 
reviewing the case. Such additional briefing would ensure that both 
sides have a full and fair opportunity to respond to issues that the 
Secretary determines are relevant to the outcome. We do not presently 
contemplate providing the parties a right to request an additional 
briefing opportunity, but we solicit comments on whether there are 
circumstances in which such a right would be appropriate.

C. Technical Changes (45 CFR Part 16)

1. Title of 45 CFR Part 16, 45 CFR Sec. Sec.  16.2 and 16.20(a)--
Updating DAB Name and Address
    We propose to delete the word ``Grant'' from the title of 45 CFR 
Part 16 and the definition of the ``Board'' in Sec.  16.2, and to 
update the name and address of the DAB in Sec.  16.20(a). In Sec.  
16.20(a), we would reference filing instructions set forth in the final 
written decision being appealed and the Appellate Division Practice 
Manual found on DAB's Web site. We indicate that the DAB's mailing 
address can be found on that Web site because the Web site can reflect 
updated addresses. We also list the 2007 address. In light of these 
references, we would delete Sec.  16.20(d) and (e), since these 
provisions refer to issues addressed in the filing instructions noted 
in revised Sec.  16.20(a) and, furthermore, do not reflect current 
Board procedures relating to electronic submissions.
2. 45 CFR Sec. Sec.  16.3(b), 16.7(a), 16.12 and 16.22(b)(1)-Deleting 
Outdated References
    45 CFR Sec. Sec.  16.3(b), 16.7(a) and 16.22(b)(1) contain outdated 
references to sections of 45 CFR Part 74, which has since been revised 
so that the cited sections no longer correspond to the referenced 
substance. For example, the references to 45 CFR 74.304 in Sec.  
16.3(b) and 16.7(a) would more properly be to 45 CFR 74.90. We propose 
to delete these references both because they are outdated and because 
the regulations at 45 CFR Part 74 are general cross-cutting 
Departmental rules and many of the programs subject to review now have 
individualized regulatory provisions that address the same subjects, in 
some cases in more detail. 45 CFR 16.12(d) contains an outdated 
reference to the Public Health Service, which we would delete. Instead, 
we would insert a parenthetical reference to the process set forth at 
42 CFR Part 50 as an example of a formal preliminary review process.
3. 45 CFR Part 16, Appendix A--Updating References and Reflecting Board 
Authority to Hear Disputes Based on Procedural Delegations of Authority
    In Appendix A, we propose to update or delete outdated statutory 
and regulatory references. In addition, as noted above, the Board 
exercises hearing and appeal responsibilities based on procedural 
delegations of authority to the Board from the Secretary, the head of 
the appropriate HHS component responsible for administering the 
program. Such a delegation may be made on a case-by-case basis, through 
general delegations of authority over a class of disputes, or through 
other arrangements between the DAB and the Secretary or the head of the 
appropriate HHS component responsible for administering the program. 
The proposed rule would clarify Appendix A to make clear that the Board 
may hear cases based on such a delegation.

D. Addition of 45 CFR Sec.  81.64--Conforming Changes in Standard of 
Review

    Regulations in 45 CFR Part 81 set forth procedures for 
administrative hearings pursuant to Title VI of the Civil Rights Act of 
1964 and 45 CFR Part 80. These hearings are conducted by hearing 
examiners who are authorized, under Sec.  81.62, to either make initial 
decisions or recommended findings and proposed decisions. These 
decisions are reviewable by a reviewing authority, under Sec.  81.104, 
and by the Secretary, under Sec.  81.106.
    The regulations governing these hearings and reviews, however, do 
not clearly articulate the standard of review to be applied by hearing 
examiners and reviewing authorities in reviewing issues of law, 
regulation or policy interpretation.
    We are thus proposing to add a new section, Sec.  81.64, to explain 
that hearing examiners and reviewing authorities are bound by all 
applicable statutes, regulations, Secretarial delegations of authority 
and published guidance and interpretations of the Secretary or relevant 
component to the extent not inconsistent with applicable statutes and 
regulations. This is the same standard, discussed above, that would be 
applied in DAB review under 45 CFR Part 16. This change would thus 
conform the standard of review in these hearings with the standard of 
review in other Departmental hearing procedures.

E. 45 CFR Sec. Sec.  160.508(c), 160.548, and 160.554--Conforming 
Changes in Standard of Review, Removal of Board Decision 
Reconsideration Process and Provision for Secretarial Review Authority

    Regulations at 45 CFR Part 160, Subpart E, set out procedures for 
administrative hearings for disputes involving the imposition of civil 
money penalties for violation of the Administrative Simplification 
provisions of HIPAA and its implementing regulations. Current 
regulations in 45 CFR Sec.  160.508(c)(1) articulate limitations on ALJ 
review with respect to finding invalid or refusing to follow Federal 
statutes, regulations, or Secretarial delegations of authority, or 
refusing to defer to published Departmental guidance. While we believe 
these limitations embody the same principles as the limitations that we 
are proposing elsewhere in this rulemaking, we are proposing to revise 
slightly 45 CFR Sec.  160.508(c)(1) to conform the description of these 
limitations to the other proposed regulatory provisions discussed in 
this rulemaking.
    These limitations are also intended to apply to Board appellate 
review of the ALJ decisions. Accordingly, to make clear that these same 
limitations also apply to Board appellate review of ALJ decisions, we 
propose to add a provision to that effect at Sec.  160.548(h)(2).
    We also propose to provide for Secretarial review authority for 
Board and certain ALJ decisions by inserting a new proposed Sec.  
160.554 and making conforming changes to 45 CFR 160.548(j) and (k)(1). 
The same considerations discussed above with respect to DAB review 
under 45 CFR Part 16 apply to decisions concerning civil money 
penalties for violations of Administrative Simplification requirements 
that are subject to the appeal processes set forth under 45 CFR Part 
160. Thus, we believe that Secretarial review authority is appropriate 
under these provisions. Because Board review is not a mandatory part of 
the appeals process under Part 160 (the Board can decline review of an 
ALJ decision), we are proposing Secretarial review of both ALJ 
decisions that the Board has declined to review and Board decisions. To 
ensure that the Board has the primary review authority, however, we 
propose that the Secretary will only be able to review an ALJ decision 
after the Board denies a request for review of the case.

[[Page 73713]]

    In addition, because of the proposed addition of Secretarial review 
to the HIPAA Administrative Simplification hearing appeals process, we 
are proposing to remove the level of review that currently exists at 
Sec.  160.548(j) for reconsideration by the Board, on request of either 
party, of its own decisions.
    The proposed removal of the reconsideration process would ensure 
the appeals process remains efficient and is not unduly prolonged. 
Also, the removal of the reconsideration process would better align the 
appeals process at Part 160 with the appeals process provided in the 
regulations at 42 CFR Part 1005, upon which the hearing appeals 
provisions at 45 CFR Part 160 were originally based.

F. Revision of 45 CFR 1303.17(a) To Conform Timing for Head Start 
Appeals To Provide for Opportunity for Secretarial Review

    The current provisions at 45 CFR 1303.17(a) require that the 
``final'' decision be rendered not later than 60 days after the closing 
of the record before the Board. We propose to revise this regulation by 
providing that this time limit is applicable only to the timing of the 
Board's decision, by replacing the phrase ``final decision'' with 
``Board's decision.''

G. Revision of 42 CFR Parts 422 and 423 By the addition of 42 CFR 
Sec. Sec.  422.1007, 422.1085, 423.1007 and 423.1085 and Revisions to 
42 CFR Sec. Sec.  422.1068, 422.1078(c), 422.1086, 422.1088, 423.1068, 
423.1078(c), 423.1086, and 423.1088--Conforming Articulation of 
Limitations on Review and Provision for Secretarial Review Authority

    Recently issued regulations in 42 CFR Parts 422 and 423 do not 
articulate the principle that administrative law judges and the Board 
are bound by all applicable statutes and regulations. Articulation of 
this principle may prevent inappropriate arguments or requests for 
equitable relief unfounded in law or practice. The articulation of this 
principle will also make the appeals process more transparent. In 
addition, we propose to include in the new regulatory provision 
language parallel to the language proposed for 45 CFR Sec.  16.14 
regarding the treatment of published guidance by the Secretary or 
relevant component. We see no basis to distinguish the scope of review 
in appeals under 42 CFR Parts 422 and 423 from that proposed in appeals 
under 45 CFR Part 16. In all cases, the fundamental interpretive 
authority rests in the Secretary or the component delegated the 
authority by the Secretary to administer the provisions at issue.
    We also propose to provide authority for Secretarial review of 
Board and ALJ decisions by adding 42 CFR Sec. Sec.  422.1085 and 
423.1085. The same considerations discussed above with respect to Board 
review under 45 CFR Part 16 apply to decisions concerning initial 
determinations under Medicare and Medicaid that are subject to the 
appeal processes set forth under 42 CFR Parts 422 and 423. Thus, we 
believe that Secretarial review authority is appropriate under these 
appeal provisions.
    Secretarial review ensures that the Department exercises its full 
authority to interpret and implement statutory and regulatory 
provisions and ensures that the Secretary's policies are appropriately 
implemented. The Secretary's views will continue to be ultimately 
subject to federal court review.
    Because DAB review is not a mandatory part of the appeals process 
under Parts 422 and 423 (the Board can deny review of an ALJ decision), 
we are proposing Secretarial review of both ALJ decisions and Board 
decisions. By this, we intend that where the Board denies or dismisses 
review of an ALJ decision (42 CFR Sec. Sec.  422.1078 and 423.1078), 
the Secretary may review the ALJ decision and affirm, reverse or 
remand, parallel to the authority in the proposed 45 CFR Sec.  16.21. 
To ensure that the Board has the primary review authority, however, we 
propose that the time frame for determination of whether the Secretary 
will review an ALJ decision will run only from the time that the Board 
denies a request for review of the case.
    In sum, we are proposing a similar opportunity for Secretarial 
review under this provision as we propose under 45 CFR Part 16.

H. Addition of 42 CFR Sec.  498.8 and Revisions to 42 CFR Sec. Sec.  
498.74, 498.89 and 498.90--Conforming Articulation of Limitations on 
Review and Provision for Secretarial Review Authority

    Current regulations in 42 CFR Part 498 do not articulate the 
principle that administrative law judges and the Board are bound by all 
applicable statutes and regulations. While in practice, this principle 
has generally been applied in decisions, and thus articulation of this 
principle will not result in any change in practice, its articulation 
may prevent inappropriate arguments or requests for equitable relief 
unfounded in law or practice. The articulation of this principle will 
also make the appeals process more transparent. In addition, we propose 
to include in the new regulatory provision language parallel to the 
language proposed for 45 CFR Sec.  16.14 regarding the treatment of 
published guidance by the Secretary or relevant component. We see no 
basis to distinguish the scope of review in appeals under 42 CFR Part 
498 from that proposed in appeals under 45 CFR Part 16. In both cases, 
the fundamental interpretive authority rests in the Secretary or the 
component delegated the authority by the Secretary to administer the 
provisions at issue.
    We also propose to provide authority for Secretarial review of 
Board and ALJ decisions. The same considerations discussed above with 
respect to Board review under 45 CFR Part 16 apply to decisions 
concerning initial determinations under Medicare and Medicaid that are 
subject to the appeal processes set forth under 42 CFR Part 498. Thus, 
we believe that Secretarial review authority is appropriate under this 
provision.
    In particular, there are a significant number of decisions under 
Part 498 that may be the first articulation of Departmental 
interpretation and implementation of policies with respect to 
applicable statutes and regulations. Only through review of these 
decisions can the Department exercise its full authority to interpret 
and implement statutory and regulatory provisions and ensure that the 
Secretary's policies are appropriately implemented. The Secretary's 
views will continue to be ultimately subject to federal court review.
    Because DAB review is not a mandatory part of the appeals process 
under Part 498 (the Board can deny review of an ALJ decision), we are 
proposing Secretarial review of both ALJ decisions and Board decisions. 
By this, we intend that where the Board denies review of an ALJ 
decision (42 CFR Sec. Sec.  498.74(b)(2), 498.83(a)), the Secretary may 
review the ALJ decision and affirm, reverse or remand, parallel to the 
authority in the proposed 45 CFR Sec.  16.21. To ensure that the Board 
has the primary review authority, however, we propose that the time 
frame for determination of whether the Secretary will review an ALJ 
decision will run only from the time that the Board denies a request 
for review of the case.
    In sum, we are proposing a similar opportunity for Secretarial 
review under this provision as we propose under 45 CFR Part 16.

I. Revisions to 42 CFR Part 1005--Conforming Provision for Secretarial 
Review Authority

    We propose to provide regulatory authority for Secretarial review 
of Board decisions concerning the exclusion, CMP, and assessment 
authorities

[[Page 73714]]

delegated to the I.G. by the Secretary. The same considerations 
discussed above with respect to Board review under 45 CFR Part 16 and 
42 CFR Part 498 apply to such decisions. Thus, we believe that 
Secretarial review authority is appropriate under this provision.
    As with 45 CFR Part 16 and 42 CFR Part 498, there are a significant 
number of decisions under 42 CFR Part 1005 that may be the first 
articulation of Departmental interpretation and implementation of 
policies with respect to applicable statutes and regulations. Only 
through review of these decisions can the Department exercise its full 
authority to interpret and implement statutory and regulatory 
provisions and ensure that the Secretary's policies are appropriately 
implemented. The Secretary's views will continue to be ultimately 
subject to federal court review.
    The proposed revisions would provide that, when the Board declines 
review of an ALJ decision under Sec.  1005.21(g), the Secretary may 
review the ALJ decision, as contemplated in proposed 42 CFR Sec.  
1005.24. To ensure that the Board continues to have the primary review 
authority, we are proposing that the time frame for determination of 
whether the Secretary will review an ALJ decision will run only from 
the time that the Board denies a request for review of the case. In 
addition, the procedure for Secretarial review has been tailored in 
proposed Sec.  1005.24 to conform to the administrative appeals process 
in Part 1005.
    Because of the limitations on Board review that currently exist in 
the regulations relating to the exclusion, CMP, and assessment 
authorities, we do not believe additional clarification is needed with 
respect to the Board's treatment of published guidance. The regulations 
limit an ALJ's ability to find invalid or refuse to follow a federal 
statute or regulation. 42 CFR Sec.  1005.4(c)(1). Also, an ALJ is 
unable to review the exercise of discretion in imposing a permissive 
exclusion, CMP, or assessment, or to reduce a period of exclusion to 
zero. 42 CFR Sec. Sec.  1005.4(c)(5)-(7). The only issues that may be 
appealed in an exclusion action are whether the petitioner received 
proper notice of the exclusion, whether a basis for exclusion exists, 
and whether the length of the exclusion is unreasonable. 42 CFR Sec.  
1001.2007(a). Further, an ALJ is required to follow the determination 
of the scope and effect of an exclusion. 42 CFR Sec.  1005.4(c)(5). 
Finally, the Board's standard of review of factual disputes is whether 
the ALJ's decision is supported by substantial evidence on the whole 
record. 42 CFR Sec.  1005.21(h). The Board's standard of review of 
legal disputes is whether the ALJ's decision is erroneous. Id. Because 
these regulations limit the issues that are appealable, they safeguard 
the discretion to pursue exclusions, CMPs, or assessments in 
appropriate cases. The proposed ability of the Secretary to review 
Board decisions will help preserve the Secretary's authority to 
interpret the exclusion, CMP, and assessment statutes and regulations.
    Therefore, we are not amending the DAB standard of review for 
matters that fall within 42 CFR Part 1005. We are, however, proposing a 
Secretarial review process under 42 CFR Part 1005 as is similarly 
proposed under 45 CFR Part 16.

III. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the Dates section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

IV. Regulatory Impact Statement

    We have examined the impact of this rule as required by Executive 
Order 12866 (September 1993, Regulatory Planning and Review), as 
amended by Executive Order 13422 (January 2007), the Regulatory 
Flexibility Act (RFA) (September 19, 1980, Pub. L. 96-354), section 
1102(b) of the Social Security Act, the Unfunded Mandates Reform Act of 
1995 (Pub. L. 104-4), and Executive Order 13132.
    Executive Order 12866, as amended, directs agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year). 
This rule concerns agency administrative appeal procedures, and any 
direct burden that is imposed on appellants (such as the cost of 
additional briefing or the cost of delays in the final agency decision) 
does not reach the economic threshold and, thus, is not considered a 
major rule. These changes in agency procedures may impact the handling 
of administrative appeals that involve more than $100 million in a 
year. But any impact would result from improved application of existing 
statutes, regulations and Departmental interpretations and must be 
attributed to those underlying legal requirements. While we conclude 
that this proposed rule is not economically significant, we 
nevertheless are characterizing this proposed rule as significant under 
E.O. 12866 because it will materially affect the procedural rights of 
grant recipients with respect to appeals. As noted above, the proposed 
rule would not affect substantive rights to administrative 
determinations consistent with existing statutes, regulations and 
Departmental interpretations.
    The RFA requires agencies to analyze options for regulatory relief 
of small businesses. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, by virtue of either nonprofit status or having 
revenues of $6 million to $29 million in any 1 year. Individuals and 
States are not included in the definition of a small entity. While 
there are a number of small entities that receive Departmental grants 
and have access to the DAB for appeal of disallowances, we have 
determined that the direct effects of the proposed changes in 
administrative appeal procedures, such as the cost of additional 
briefing or the cost of delays in the final agency decision, are not 
economically significant. Thus, we are not preparing an analysis for 
the RFA because we have determined that this rule will not have a 
significant economic impact on a substantial number of small entities.
    In addition, section 1102(b) of the Social Security Act requires us 
to prepare a regulatory impact analysis if a rule may have a 
significant impact on the operations of a substantial number of small 
rural hospitals. This analysis must conform to the provisions of 
section 603 of the RFA. For purposes of section 1102(b) of the Social 
Security Act, we define a small rural hospital as a hospital that is 
located outside of a Core-Based Statistical Area and has fewer than 100 
beds. We are not preparing an analysis for section 1102(b) of the Act 
because we have determined that this rule will not have a significant 
impact on the operations of a substantial number of small rural 
hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending

[[Page 73715]]

in any one year of $100 million in 1995 dollars, updated annually for 
inflation. That threshold level is currently approximately $120 
million. The direct burden of these changes in administrative appeal 
procedures, such as the cost of additional briefing or the cost of 
delays in the final agency decision, does not reach the economic 
threshold. An indirect impact may result from improved application of 
existing statutes, regulations and Departmental interpretations, but 
must be attributed to those underlying legal requirements. As a result, 
we conclude that this rule will have no consequential effect on State, 
local, or tribal governments or on the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. Since this regulation does not impose any significant 
direct costs on State or local governments, the requirements of E.O. 
13132 are not applicable.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 422

    Administrative practice and procedure, Health facilities, Health 
maintenance organizations (HMO), Medicare, Penalties, Privacy, and 
Reporting and recordkeeping requirements.

42 CFR Part 423

    Administrative practice and procedure, Emergency medical services, 
Health facilities, Health maintenance organizations (HMO), Health 
professionals, Medicare, Penalties, Privacy, and Reporting and 
recordkeeping requirements.

42 CFR Part 498

    Administrative practice and procedure, Health facilities, Health 
professions, Medicare, and Reporting and recordkeeping requirements.

42 CFR Part 1005

    Administrative practice and procedure, Fraud, Grant programs-
health, Health facilities, Health professions, Maternal and child 
health, Medicaid, Medicare, Penalties, and Social security.

45 CFR Part 16

    Administrative practice and procedure, Grant programs health, and 
Grant programs-social programs.

45 CFR Part 81

    Administrative practice and procedure, and Civil rights.

45 CFR Part 160

    Administrative practice and procedure, Computer technology, Health 
care, Health facilities, Health insurance, Health records, Hospitals, 
Medicaid, Medicare, Penalties, and Reporting and recordkeeping 
requirements.

45 CFR Part 1303

    Administrative practice and procedure, Education of disadvantaged, 
Grant programs-social programs, and Reporting and recordkeeping 
requirements.
    For the reasons set forth in this preamble, the Department of 
Health and Human Services proposes to amend 42 CFR chapters IV (parts 
422 and 423 as published on December 5, 2007 (72 FR 68700)) and V and 
45 CFR chapters I and XIII as follows:

Title 42--Public Health

PART 422--MEDICARE ADVANTAGE PROGRAM

    1. The authority citation for part 422 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

Subpart T--Appeal procedures for Civil Money Penalties

    2. Section 422.1007 is added to read as follows:


Sec.  422.1007  Limitations of review.

    The ALJ and the Departmental Appeals Board may not find invalid or 
refuse to follow Federal statutes, regulations, or Secretarial 
delegations of authority and must follow published guidance to the 
extent not inconsistent with statute or regulation.
    3. Section 422.1068 is amended by--
    A. Removing the word ``or'' at the end of paragraph (b)(3).
    B. Redesignating paragraph (b)(4) as paragraph (b)(5).
    C. Adding new paragraph (b)(4).
    The addition reads as follows:


Sec.  422.1068  Administrative Law Judge's decision.

* * * * *
    (b) * * *
    (4) The Secretary undertakes review of the case pursuant to Sec.  
422.1085 of this chapter.
* * * * *
    4. Section 422.1078 is amended by revising paragraph (c) to read as 
follows:


Sec.  422.1078  Departmental Appeals Board action on request for 
review.

* * * * *
    (c) Effect of dismissal. The dismissal of a request for Board 
review shall be the final agency decision unless the Secretary elects 
review under Sec.  422.1085.
* * * * *
    5. Section 422.1085 is added to read as follows:


Sec.  422.1085  Secretarial Review of ALJ or Departmental Appeals Board 
decisions.

    The Secretary may review a decision of an ALJ or the Board for 
error in applying statutes, regulations or interpretive policy.
    (a) A copy of each preliminary Board decision will be delivered to 
the Secretary and the parties within 5 working days from the date the 
Board issues it. When the Board denies a request for review of an ALJ 
decision, a copy of the ALJ decision will be delivered to the Secretary 
and the parties within 5 working days from the date the Board declines 
to review it.
    (b) After delivery of the Board or ALJ decision, the Secretary may, 
within 30 days of receipt of the decision, undertake review of the case 
by mailing (or otherwise communicating) to the Board, or the ALJ, and 
the parties notice of a pending Secretarial review. The underlying 
decision will be a preliminary decision during the 60-day period after 
issuance, or a longer period while Secretarial review is pending. If 
the Secretary decides not to review the case within 30 days, or if the 
Secretary affirms the decision, summarily, the Board or ALJ decision 
becomes the final decision of the Secretary on the matter.
    (c) After undertaking review of a case, the Secretary may affirm or 
reverse the underlying decision, or remand the case with instructions 
for further proceedings. If the Secretary affirms with modifications or 
reverses the underlying decision, a written decision that sets forth 
the basis for the action will be the final decision of the Secretary on 
the matter. If the Secretary remands the case for further proceedings, 
the original Board or ALJ decision shall be set aside and a written 
remand order will issue from the Secretary which shall include the 
reasons for remand and instructions on the proper application of 
statutes, regulations or interpretive policy. Such

[[Page 73716]]

an order will be binding on the Board or ALJ which shall issue a new 
decision consistent with the Secretary's remand order.
    (d) If the Secretary declines review, or disposes of the case by 
final decision affirming or reversing the Board, the Board shall 
promptly issue a notice of case closure to the parties.
    6. Section 422.1086 is amended by revising the section heading, the 
introductory text of paragraph (a), and paragraph (c) to read as 
follows:


Sec.  422.1086  Effect of the Departmental Appeals Board or Secretarial 
decision.

    (a) General rule. A decision of the Board is the final agency 
decision, unless: the time period permitted for Secretarial review has 
not elapsed; it is the subject of a Secretarial remand; or it is set 
aside by a decision by the Secretary to affirm or reverse. If a 
decision of the Board is set aside by the Secretary, the Secretary 
shall issue the final agency decision. The final agency decision shall 
be indicated in the notice of case closure issued by the Board pursuant 
to 422.1085(d), and shall be binding unless --
* * * * *
    (c) Special rules. Civil money penalty--
    Finality of decision. When CMS imposes a civil money penalty, the 
final administrative action that initiates the 60-day period for 
seeking judicial review will be receipt of the notice of case closure 
issued by the Board pursuant to Sec.  422.1085(d).
    7. Section 422.1088 is amended by revising paragraph (a) to read as 
follows:


Sec.  422.1088  Extension of time for seeking judicial review.

    (a) Any affected party that is dissatisfied with a final 
administrative decision that imposes a CMP, either a binding decision 
of the Departmental Appeals Board under 422.1086 or a decision by the 
Secretary under 422.1085, and is entitled to judicial review must 
commence a civil action within 60 calendar days from receipt of the 
notice of case closure issued pursuant to 422.1085(d), unless the Board 
extends the time in accordance with paragraph (c) of this section.
* * * * *

PART 423--VOLUNTEER MEDICAL PRESCRIPTION DRUG BENEFIT

    8. The authority for part 423 continues to read as follows:

    Authority: Secs 1102, 1860D-1 through 1860D-42, and 1871 of the 
Social Security Act (42 U.S.C. 1302, 1395w-101 through 1395w-152, 
and 1395hh).

Subpart T--Appeal Procedures for Civil Money Penalties

    9. Section 423.1007 is added to read as follows:


Sec.  423.1007  Limitations of review.

    The ALJ and the Departmental Appeals Board may not find invalid or 
refuse to follow Federal statutes, regulations, or Secretarial 
delegations of authority and must follow published guidance to the 
extent not inconsistent with statute or regulation.
    10. Section 423.1068 is amended by--
    A. Removing the word ``or'' at the end of paragraph (b)(3).
    B. Redesignating paragraph (b)(4) as paragraph (b)(5).
    C. Adding new paragraph (b)(4).
    The addition reads as follows:


Sec.  423.1068  Administrative Law Judge's decision.

* * * * *
    (b) * * *
    (4) The Secretary undertakes review of the case pursuant to Sec.  
423.1085.
* * * * *
    11. Section 423.1078 is amended by revising paragraph (c) to read 
as follows:


Sec.  423.1078  Departmental Appeals Board action on request for 
review.

* * * * *
    (c) Effect of dismissal. The dismissal of a request for Board 
review shall be the final agency decision unless the Secretary elects 
review under Sec.  423.1085.
* * * * *
    12. Section 423.1085 is added to read as follows:


Sec.  423.1085  Secretarial Review of ALJ or Departmental Appeals Board 
decisions.

    The Secretary may review a decision of an ALJ or the Board for 
error in applying statutes, regulations or interpretive policy.
    (a) A copy of each preliminary Board decision will be delivered to 
the Secretary and the parties within 5 working days from the date the 
Board issues it. When the Board denies a request for review of an ALJ 
decision, a copy of the ALJ decision will be delivered to the Secretary 
and the parties within 5 working days from the date the Board declines 
to review it.
    (b) After delivery of the Board or ALJ decision, the Secretary may, 
within 30 days of receipt of the decision, undertake review of the case 
by mailing (or otherwise communicating) to the Board, or the ALJ, and 
the parties notice of a pending Secretarial review. The underlying 
decision will be a preliminary decision during the 60-day period after 
issuance or a longer period while Secretarial review is pending. If the 
Secretary decides not to review the case within 30 days, or if the 
Secretary affirms the decision, summarily, the Board or ALJ decision 
becomes the final decision of the Secretary on the matter.
    (c) After undertaking review of a case, the Secretary may affirm or 
reverse the underlying decision, or remand the case with instructions 
for further proceedings. If the Secretary affirms with modifications or 
reverses the underlying decision, a written decision that sets forth 
the basis for the action will be the final decision of the Secretary on 
the matter. If the Secretary remands the case for further proceedings, 
the original Board or ALJ decision shall be set aside and a written 
remand order will issue from the Secretary which shall include the 
reasons for remand and instructions on the proper application of 
statutes, regulations or interpretive policy. Such an order will be 
binding on the Board or ALJ which shall issue a new decision consistent 
with the Secretary's remand order.
    (d) If the Secretary declines review, or disposes of the case by 
final decision affirming or reversing the Board, the Board shall 
promptly issue a notice of case closure to the parties.
    13. Section 423.1086 is amended by revising the section heading, 
the introductory text of paragraph (a), and paragraph (c) to read as 
follows:


Sec.  423.1086  Effect of the Departmental Appeals Board or Secretarial 
decision.

    (a) General rule. A decision of the Board is the final agency 
decision, unless: the time period permitted for Secretarial review has 
not elapsed; it is the subject of a Secretarial remand; or it is set 
aside by a decision by the Secretary to affirm or reverse. If a 
decision of the Board is set aside by the Secretary, the Secretary 
shall issue the final agency decision. The final agency decision shall 
be indicated in the notice of case closure issued by the Board pursuant 
to 423.1085(d), and shall be binding unless--
* * * * *
    (c) Special rules. Civil money penalty--
    Finality of decision. When CMS imposes a civil money penalty, the 
final administrative action that initiates the 60-day period for 
seeking judicial review will be receipt of the notice of case closure 
issued by the Board pursuant to 423.1085(d).
    14. Section 423.1088 is amended by revising paragraph (a) to read 
as follows:

[[Page 73717]]

Sec.  423.1088  Extension of time for seeking judicial review.

    (a) Any affected party that is dissatisfied with a final 
administrative decision that imposes a CMP, either a binding decision 
of the Departmental Appeals Board under Sec.  423.1086 or a decision by 
the Secretary under Sec.  423.1085, and is entitled to judicial review 
must commence a civil action within 60 calendar days from receipt of 
the notice of case closure issued pursuant to Sec.  423.1085(d), unless 
the Board extends the time in accordance with paragraph (c) of this 
section.
* * * * *

PART 498-- APPEALS PROCEDURES FOR DETERMINATIONS THAT AFFECT 
PARTICIPATION IN THE MEDICARE PROGRAM AND FOR DETERMINATIONS THAT 
AFFECT THE PARTICIPATION OF ICFS/MR AND CERTAIN NFS IN THE MEDICAID 
PROGRAM

    15. The authority citation for part 498 continues to read as 
follows:

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 
U.S.C. 1302 and 1395hh).

Subpart A--General Provisions

    16. Section 498.8 is added to read as follows:


Sec.  498.8  Limitations of review.

    The ALJ and the Departmental Appeals Board may not find invalid or 
refuse to follow Federal statutes, regulations, or Secretarial 
delegations of authority and must follow published guidance to the 
extent not inconsistent with statute or regulation.

Subpart D--Hearings

    17. Section 498.74 is amended by--
    A. Redesignating paragraphs (b)(2), (b)(3) and (b)(4) as (b)(3), 
(b)(4) and (b)(5), respectively.
    B. Adding new paragraph (b)(2).
    The addition reads as follows:


Sec.  498.74  Administrative Law Judge's decision.

* * * * *
    (b) * * *
    (2) The Secretary undertakes review of the case pursuant to Sec.  
498.89.
* * * * *

Subpart E--Dep